Some Chinese banks raise mortgage rates as profits shrink, reports say
2024.12.19 05:16
BEIJING (Reuters) – Chinese banks in several cities have taken the unusual step of raising mortgage rates, Chinese media reported, underscoring concerns over their shrinking profit margins amid a faltering economic recovery.
Some commercial banks in cities such as Guangzhou, Qingdao and Nanjing have raised first-home mortgage rates by 5 basis points (bps) to 20 bps since November, to as high as 3.1%, the official Beijng Daily, among other media, reported.
The increases underscore the mounting pressure on Chinese banks, which have been pushed to cut mortgage rates in recent years to spur home purchases after property developers were hit by a debt crisis.
Net interest margins at banks, a key measure of lending profitability, shrank to a record low of 1.53% in the third quarter, official data shows.
The government has pushed for lower lending rates as overall lending demand remains weak. It announced measures in September to encourage homebuying, which included cutting existing mortgage rates.
To cushion the impact of shrinking margins, banks in October lowered deposit rates to reduce costs.
The government in September also pledged to inject capital into the biggest state banks to increase their capacity to support the economy.
Moody’s (NYSE:) Ratings said in a research note this week that NIMs will remain under pressure over the next 12-18 months.
A slide in home prices is expected to slow down this year and next, before prices stabilise in 2026, a Reuters poll showed, as measures to reverse the property slump start to bear fruit.
